HYLA Blog

The Big Reveal: How Will The New Apple iPhone Devices Impact the Secondary Market?

Rumors have been circling for months about what Apple’s newest device will look like, and whether it will live up to the ‘biggest upgrade in years’ hype. All will be revealed on September 12th at Apple’s ‘Special Event’. While nothing is confirmed yet, rumor has it that Apple will be launching a premium device, the iPhone X, the iPhone 8 and 8 Plus, as well asthe iPhone 7S and 7S Plus.

What we do know is that Apple is pinning its hopes on its 10th anniversary devices. Consumers felt a little deflated after the iPhone 7 launch, and Apple’s sales have been up and down over the last few quarters. Apple really needs the iPhone 8 to be a success.

What industry experts will be looking for after the launch on Tuesday is the impact that the new devices will have on the market. Expectations for ground breaking updates are modest, which begs the question: will the new features such as wireless charging, AR capabilities, being waterproof and improved battery life be enough to win over new customers?

The expected price tag from $1,000 is likely to be a cause for concern for the average consumer. And, the average consumer is also much more likely to keep hold of their smartphone for longer than they previously did. This will influence the demand for the new iPhone devices and, consequently, have a significant impact on the secondary device market.

Are we heading for a (super)cycle?

Despite these concerns, analysts have predicted that Apple will experience a ‘supercycle’ - a scenario whereby iPhone 8 and iPhone X sales soar, and both the supply and demand of secondary devices increases.

While the cost of the new device may dissuade consumers to purchase, many will opt for a monthly payment deal that both the carriers and Apple offer, meaning they can spread the $1,000 cost and can afford to upgrade. The price tag also won’t be a barrier for the early adopters who are most likely to drive an influx of iPhone 7 devices, which will spur on the secondary device market.

The last supercycle was in 2014 when the iPhone 6 and iPhone 6 Plus devices were introduced. However, the influx of used devices led to their value plummeting, which created a crash for the secondary device market.

Whether Apple will see the explosion of iPhone replacement demand is debated though. Analysts at Deutsche Bank recently stated that the ‘supercycle’ tipped to drive sales of the iPhone could simply just be a ‘cycle’. Apple is facing the challenge of elongated refresh cycles, and a supercycle is largely dependent on upgrade habits.

New research from Kantar shows that in 2016, Americans kept their smartphones for 22.7 months on average, up from 20.5 months, in 2013. The UK and France held on to them the longest, with an average of 23.4 months and 22.2 months respectively. With saturation in mature markets, it is unlikely that Apple will make its headway in Europe and the US.

Apple will instead be relying on international markets. But a declining share in the Chinese market and increased competition within China will be a challenge. Huawei recently overtook Apple in global sales, and fierce competition from Chinese brands such as Oppo and Vivo could all make it difficult for Apple to assert its dominance with its latest devices.

So how will this impact the secondary device market?

Unlike in 2014, the secondary device market is prepared for an influx of used devices into the market. Large numbers of trade-ins from the US and China could create a supercycle. But the market is now more mature and well equipped to cope with an increased supply of devices.

In fact, our research shows that demand for iPhone devices continues and the secondary market is going from strength to strength, especially for those with price sensitivity.

According to Persistence Market Research, the refurbished and used phone market globally will have a compounded annual growth rate (CAGR) of 8.9% from 2017-2025. This would mean that the market will grow from $19.7 billion to $38.9 billion during that time period.

At HYLA Mobile, we anticipate that secondary device values will increase or at least remain the same, which unlike in 2014 would make for a successful supercycle, should one happen.

Success for Apple?

With this year marking the 10-year anniversary of the original iPhone, there will be excitement surrounding the launch of the new devices. What we will soon discover is if this interest will translate into intent to buy or upgrade to the device.

Supercycle or not, the new iPhones will still do extremely well. And in turn, this will stimulate availability of used iPhones, which can be redistributed to deliver new service revenues from users in new markets. Whatever the outcome, the secondary device market will be set for growth.